The "chip wars" between the US and China have taken a new turn with members of a House Select Committee threatening action against Japanese companies if the country does not do more to restrict sales of chipmaking kit to China.

In a letter sent to the Japanese Ambassador to the US, two representatives of the House Select Committee on the Chinese Communist Party urged greater action to address the flow of semiconductor manufacturing equipment from Japan to Chinese companies.

Republican John Moolenaar, chair of the committee, and Democrat Raja Krishnamoorthi said that while multilateral action is the best path to curb Beijing's semiconductor ambitions, the US "retains multiple tools to unilaterally move forward if negotiations are unsuccessful."

Such tools might include expanding the scope of the Foreign Direct Product Rule (FDPR) so that any chipmaking equipment produced using any American technology would require a US export license before it could be sold to China.

The pair warned that US Congress might also place restrictions on CHIPS Act funding to companies or countries that "ship sophisticated semiconductor manufacturing equipment (SME) to the People's Republic of China (PRC)."

Japan, along with the US and the Netherlands, is one of the leading countries in making and selling the specialized and often costly equipment used in the manufacture of chips.

In the letter, a copy of which has been posted by Bloomberg, the two representatives state: "While we understand negotiations to strengthen our multilateral export controls remain ongoing, recent news indicates negotiations face a delay, in part over concerns by participants that enhanced controls will have a negative financial impact on your SME industry."

The pair go on to claim: "Suggestions that Japanese, US or Dutch SME manufacturers have been hurt by multilateral export controls do not appear to stand up to scrutiny."

However, their letter was sent in the same week that Dutch photolithography giant ASML posted a reduced 2025 sales forecast due to lower demand from Chinese customers, causing a 16 percent fall in the company's share price. The company said it now expects the Middle Kingdom to account for just 20 percent of its annual revenue next year, down from roughly 49 percent in earlier years, before the US toughened up its export rules and leaned on the Netherlands to follow suit.

The letter continues that the representatives believe that these exports pose a long-term national security threat as Beijing is "actively leveraging US, Japanese, and Dutch SME to build out the world's largest semiconductor manufacturing industrial base that could, by some estimates, control around 50 percent of global foundry capacity for 50 to 180 nanometers within the next decade."

Such forecasts have come from sources such as Taiwanese research firm TrendForce, which said earlier this year that China's chip manufacturing capacity is expected to more than double within the next five to seven years as the country seeks to ramp up its own internal production to cut its reliance on foreign chips.

Ironically, this was said to be in response to Washington's policies aimed at constraining Beijing's access to semiconductors.

The congressmen also claim in their letter that much of the new foundry capacity is being built by Huawei, one of Washington's favorite bogeymen, while the company keeps its involvement in the projects secret.

"This means a large amount of our SME exports to the PRC are directly going to a firm that has a pattern of undermining our national security," they state in the letter, although they can only cite media reports from last year that the Chinese firm might be building a network of secret semiconductor fabs.

The pair also wrote to Commerce Secretary Gina Raimondo last week, urging her to take further action against Huawei over its clandestine semiconductor activities.

Such threats from the US put the Japanese in a difficult position. Earlier this year, the country's leadership was said to be reluctant to expand curbs on exports to China any further, which is understandable when it has been the largest global market for such products in recent years.

Beijing has also threatened Tokyo with "severe economic retaliation" if it further restricts sales of chipmaking equipment in line with US demands. ®

https://www.theregister.com//2024/10/22/us_pressure_japan_china/